State Street, Fidelity Buy Stakes In Swaps Exchange: Crain’s

By Brendan Conway

The effort to put interest-rate swaps and other complex derivatives on public exchanges — it’s supposed to come to fruition next year — is attracting some of the biggest fund managers around lately.

Crain’s Chicago reports that Boston asset-management giants State Street (STT) and Fidelity Investments have each taken a stake in Eris Exchange LLC, the interest-rate swap-trading venue founded in 2010. Recall that this excahnge hopes to grab trading under the new requirements of the Dodd-Frank financial overhaul, which pushes big swaths of over-the-counter trading onto public exchanges.

Neither State Street nor Fidelity’s Devonshire Investors, the firm’s private-equity wing, disclosed the size of their minority stakes to Crain’s. From Lynne Marek:

It has been challenging for the exchange to build trading volume in the past two years without the Commodity Futures Trading Commission setting deadlines to implement key provisions of Dodd-Frank that would spur the flow of new trading to Eris. In addition, low interest rates have damped volatility in the market, narrowing spreads and depressing trading volume.

But key provisions of the law finally kick in next year. The commission recently said over-the-counter trading in swaps and other derivatives, including about $465 trillion in notional worldwide interest-rate market activity, would be required to move to the public trading and clearing platforms by 2013.

“There’s been a significant acceleration in the pace of people getting ready to trade cleared swaps,” Eris CEO Neal Brady said in response to an inquiry about the new investments.

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Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.